India, the next 10 years: Where will growth come from?

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2000 to 2009 has been a decade of heady growth for Indians and Indian business. The Sensex on December 31, 1999 had just touched 5,000. Today, we are at three times that level at 17,000. Our forex reserves were USD 34 billion, today they stand at almost USD 290 billion. In the first year after a global economic crisis, the country's GDP has grown at 7%. A decade ago we were still plodding at 4%.

As the year winds down and the decade comes to an end, in a CNBC-TV18 special discussion, some of the best minds of corporate India, KV Kamath, Non-Executive Chairman, ICICI Bank, Jerry Rao, Founder, MphasiS, R Gopalakrishnan, ED, Tata Sons, did some crystal ball gazing on the road ahead for the Indian economy in the next decade.

Here is a verbatim transcript of the discussion. Also watch the accompanying video.

Q: In some sense I think you were an important architect of the prosperity of the first decade. You started the retail loan revolution. Do you think our growth was because of something we got right? To some extent the whole world went through an unprecedented prosperity in this decade that is just ending. So were we just lucky or do you think that this was a very indigenous achievement and that therefore the next decade can be better?

Kamath: What happened in the last nine years - I would think it was primarily an indigenous development. If you look back just 50-60 years of history and look at what happened in China, look at what happened before that in South East Asia, before that in the tiger economies and before that in Japan from the 50s, I think once you have transformational growth starting to happen, it is like a catalytic reaction, which continues on and on for a very long period of time. The period of time again from these cases you can see is probably 15 to 25 years. We are into maybe four-five years of that and that has transformed this nation. So if that were given and we can discuss this as we go along, I would think that we have another minimum 15 years of growth ahead of us. That is the reason why you see the bounce back happening very quickly after global disaster a year back.

Q: You would agree with that or do you think we got something right?

Rao: 60s also had high world growth, but we didn't participate in it. I think in 2000-2010 decade we have participated because of the Narasimha Rao reforms of 1990s. Let us be very clear, reforms take off with a lag in terms of their impact on the real economy. So those reforms ten years later start showing and have now showed brilliant results throughout that decade. We should give credit where it lies not simply ascribed as to worldwide process.

Q: Narasimha Rao government is what you are referring to, you are not even able to think of very big reforms in the decade that just ended and very clearly the world is maimed and so you are not going to get the global prosperity, we got for at least six of the last ten years. So you are not going to have perhaps two things, this unleashing of entrepreneurial energy, which probably happened in the first half of 90s, we have not seen that dose of reforms in the current decade, there will be that grappling with only what has already been juiced out in this decade as well a maimed global growth. Are you really entering this decade with the confidence that we will do a repeat or do better than the decade that was?

Gopalakrishnan: Yes, I am entering with a lot of confidence. There are always caveats in this but I am entering with a lot of confidence. In general, the world has seen an unprecedented growth rate during 2000 and more than 5% world economic growth is something that they last saw in 50s. India has also seen exceptional economic growth, so these are factors. Now you are trying to see the interplay between the two. Let us face it, there is a phase lied between the Narasimha Rao government's reform agenda and the actual benefits flowing on the ground. So there is a bit of a lag effect. We have never seen infrastructure spend as we have seen during the last ten years. We have never seen the telecom revolution as we have seen in the last ten years. We have never seen the building up of a forex and the self assuredness in the world markets resulting in corporate acquisition and so on as you have seen in the last ten years.

So I think if you add up all this together and recognize that corporate India in particular had shaped up during the 90s with cost cutting, we have created a formula, which has a high potential and a high possibility to be sustainable. We can botch it up but the batsman can get to the crease, the wicket can be good that he has to get the runs and therefore the challenge does lie ahead.